Former Iraq Security Contractors Say Firm Bought Black Market Weapons, Swapped Booze for Rockets

Last spring, the U.S. diplomatic mission in Iraq got a makeover, replacing the scandal-plagued Blackwater private security company with a firm named Triple Canopy.

The new $1 billion contract cemented Triple Canopy's status as the pre-eminent provider of private security services in Iraq, with its heavily armed employees appearing side by side with senior State Department diplomats.

But the company's rise to prominence followed a long, often chaotic route, marked by questionable weapons deals, government bungling and a criminal investigation that was ultimately closed without charges being filed, according to newly released investigative files.

Company employees told federal investigators that Triple Canopy swapped booze for weapons and supplies from the U.S. military. They said the company bought guns and other arms on the black market in Iraq. Some worried that the money was flowing into the hands of insurgents, records show.

The previously undisclosed documents and interviews with current and former Triple Canopy officials raise new questions about the U.S. government's ability to oversee private security contractors in a fluid and uncertain legal environment. And they give a glimpse into the messy business of creating a private army on the fly in the middle of a war zone.

"We're spending a lot of money on these rifles, millions of dollars -- where do you think that money is going to?” [1] Ronald Boline, a former Triple Canopy manager, said in a lawsuit deposition videotaped [2] in June 2007. “Who are we supporting in doing that? We're supporting people who are trying to kill Americans is the logical conclusion."

That lawsuit against the company, filed in a Virginia circuit court by other former employees who sued Triple Canopy for wrongful termination, was settled this week, records show, but no terms were disclosed.

The criminal investigation began in 2007 after federal investigators received a tip that Triple Canopy was using stolen cars and captured Iraqi weapons [3] to boost profits to over 40 percent on some contracts. Andrew T. Baxter, the interim U.S. attorney for the Northern District of New York, declined to comment on why his office decided not to file charges. (His office handled the case because Triple Canopy’s invoices were paid out of a nearby federal contract processing center.)

Stuart Bowen, the special inspector general for Iraq reconstruction, who oversaw the investigation, refused to talk about details. But he said the difficulty in building the case were indicative of the haphazard atmosphere in which billions of dollars of U.S. money was spent in Iraq without oversight.

"It's unclear if anything that Triple Canopy did was criminal, but it was symptomatic of the chaos that prevailed at the time," Bowen said. "It's another example of contracting gone wrong."

Triple Canopy officials said the firm had done nothing wrong. They acknowledged buying weapons in Iraq when they were unable to import U.S. guns. But Lee Van Arsdale, a retired Delta Force colonel who was the company’s CEO until recently, said in an interview before retiring that the firm had taken every precaution to ensure that no money wound up in insurgents’ hands.

"Not only are we former military, but our former colleagues are still serving in uniform, living, eating and breathing right beside us in some cases. In some cases, we've got family members out there," Van Arsdale said. "To say that we're going to fund the insurgency either directly or indirectly, that's insulting."

Triple Canopy began in September 2003, when two former Special Forces soldiers formed the company to take advantage of the burgeoning market for private security. Iraq was exploding in violence, and the U.S. lacked enough soldiers to protect U.S. and Iraqi officials, infrastructure and diplomatic outposts.